German business sentiment unexpectedly fell in September, a closely watched survey showed Wednesday, in a setback for chancellor Friedrich Merz as he tries to revive Europe鈥檚 top economy.
The Ifo institute鈥檚 confidence barometer fell to 87.7 points, down from 88.9 in August, breaking a run of eight straight increases.
Analysts polled by financial data firm FactSet had expected a slight rise to 89.2 points.
Both businesses鈥� assessment of their current situation and their expectations for the future took a knock, bringing an end to a run of positive data releases that had raised hopes of a gentle recovery for Germany鈥檚 economy.
鈥楢ny glimmers of hope that had emerged among capital goods manufacturers in the previous month have faded,鈥� Ifo president Clemens Fuest said. 鈥楶rospects for an economic recovery have suffered a setback鈥�.
Apart from construction, which rose slightly, the fall affected all sectors 鈥� with services in particular dragged down by gloom among transport and logistics firms.
鈥楾oday was an unexpected blow for the German economy,鈥� LBBW bank analyst Elmar Voelker said.
鈥楾he September survey makes one fear that the German economy will remain stuck in near stagnation until at least the end of the year.鈥�
Hit by patchy global growth, high production costs and increasingly fierce Chinese competition, Germany鈥檚 economy was in the doldrums even before US president Donald Trump began a tariff onslaught in April that has hit Europe鈥檚 traditional export powerhouse.
Merz鈥檚 ruling coalition has vowed to spend hundreds of billions on infrastructure over coming years to help boost growth, but economists have warned that its impact will be limited without reform to make German industry more competitive.
Leading institutes earlier this month cut their economic growth forecasts for the year to a little above zero per cent, citing the impact of Trump鈥檚 tariffs as well as the wait so far for the promised surge in German government spending.
